Dividing subdivision costs

[devo76]

Hi all. Just wondering how you divide costs for the purpose of tax and loan repayments in the future. In my situation I will
Build a house behind my existing IP.
Build a garage and extention on the existing house.
Then subdivide.
I assume the cost of the new house is tied to it and the actual subdivision costs are split between both blocks but what about the new garage and extensions. Are they split between the two just on the existing house.

What's the protocol with this ?

 

[Mry]

Its important to ensure that you split up the different assets properly. For arguments sake, we are looking at 2 assets, one a piece of land, and the other a piece of land and a building. You would need a valuer to apportion values between each asset to work out the proportion to assign each on your loan, or you can do it yourself.

Once that occurs, you need to allocate incoming costs against each asset. The garage and extension are cost base items to add to your existing house, you cannot split them between each asset for cost base and loan purposes as they are specific to one asset. Costs involved in subdividing are split between each property typically according to land value. Specific property costs are allocated to specific properties.

Yes, this can be messy. It can be easy to fund these developments with one loan and once you are comfortable / your accountant is comfortable with the allocation, you can use TR 2000/2 to split the loan between the two properties.

 

[devo76]

Thanks for the reply.
I have an existing loan for the existing property. No worries there.
I have a new loan for the new house. No worries there.

I also have an equity loan that covered the garage,extention and sub costs.
It's this one I guess I have to proportion correctly.I have recorded every dollar spent so shouldn't be too much of a hassle.